Topic Title: Reader Case Study - English Rose With Flaming Hair - What To Pay Off First?
Life Situation: Single girl, late 30s, no dependants, English and living in England.
Gross Salary/Wages: £0. Self-employed. (Lack of income due to chronic illness.)
Pre-tax deductions: £0
Other Ordinary Income: £10,028 Student grants and loans. Studying Bachelors of Science degree in Human Nutrition. Course ends July 2019.
Taxes: £0
Net Income: £10,028
Current expenses:
Car £0 (do not drive)
Electric £0 (paid for by family)
Home insurance/life insurance £0 (choose not have them)
TV licence/cable etc £0 (I don't own a TV)
Government loan £1
Mobile phone £9
Credit card £10
Food, household, toiletries £60
Home phone and internet £20.49 (£17.99 phone line rental plus free evening and weekend calls, £2.50 unlimited broadband)
Water rates £24
Unsecured loan £71.31
Secured loan £84.55
Buildings insurance, service charges, ground rent £124.08 (leasehold property, rates set by property management company)
Mortgage (interest only) £259.20
Monthly total: £663.63
Per annum: £7,963.56
Monthly surplus £172.03
Annual surplus £2,064.44
Assets:
Current account £0.02
Savings account £9.79
Home £70,000 (1 bed flat)
Total assets £70,009.81
Liabilities:
Overdraft. Original loan £250. Zero % interest til 2019. Current balance £249.98
Credit card. Original loan £1,522. Zero % interest til paid off as a/c in default. Monthly payment £10. Current balance £653.
Secured loan. Original loan £16,916. 2.98% interest. Monthly payment £84.55. Current balance £12,859. Time remaining 16 years.
Unsecured loan. Original loan £12,099. 4.63% interest. Monthly payment £71.31. Current balance £9,202. Time remaining 15 years.
Mortgage interest only. Original loan £64,249. 4.63% interest. Monthly payment £259.20. Current balance £67,182. Time remaining 19 years. (Yes, it is correct that the balance of the mortgage has increased)
Government loan. Original loan amount £487. Zero % interest. Monthly payment £1. Current balance £335
Scholarship £1189 (needs to be repaid)
Grant £200 (needs to be repaid)
Total Liabilities: £91,534.98
Net assets: Minus £21,525.17
A bit about me:
Thought it be be useful for you good folks of the forum to understand a little about the whats, whys and hows that led to me being neatly in the midst of this eye rolling, baby I'm burnin', flaming debt emergency. In all honestly, I'm super private, so I've really been unsure about whether to share or not, but since it's all stuff that's pertinant to my current situ, this is essentially anonymous and I'm asking for all of your help then here goes..................
I grew up in poverty with 2 super smart parents who chose not to work and live on benefits. The household was one of fear and anger and addiction (one parent with alcohol issues).
My homelife led me to a lifelong belief that I was worthless. I left home at 15 to move in with a violent boyfriend and was already addicted to alcohol myself. This was also the start of a pattern of crazy (grim) relationships. There were some nice guys in the mix, but I would inevitably treat them badly or walk away (because I believed I wasn't worth caring about).
As soon as I reached 18 I started getting numerous store cards, then credit cards then loans and then loans to pay off other loans etc. No matter how much money I earned, I always had nothing to show for it and always spent more than I earned.
I stopped drinking, smoking and taking drugs about 7 years ago. I was attacked on the way to work and didn't want this to be another thing I dealt with (or didn't deal with!) by masking it with booze, so I quit everything cold turkey.
Didn't realise at the time, but I swapped the alcohol addiction for food addiction. Love eating healthy food and cooking is one of my passions, but would waste endless amounts of money I didn't have on junk food (to numb, comfort and to punish for being worthless). Issue now resolved.
Couple of years ago the immense amount of emotional and physical stress I had put my body and mind under for most of my life (addiction, anxiety, depression, trauma) finally came to a head and I was diagnosed with 2 chronic illnesses (neurological and physiological) which literally stopped me in my tracks (pretty much housebound, even standing up to get a cup of tea was challenging to say the least). However, it proved to be a real life changing experience as I received occupational therapy (which helped me on the road to physical and mental recovery) and cognitive behavioural therapy which really helped me to understand my core beliefs about myself and to help change them.
So, I now understand that my belief of 'I'm worthless' led to my awful financial choices. I literally could not keep money in my bank account because that would have meant I was worthwhile, and by spending more than I earned I could keep proving my belief that I was worthless. I now operate from a place of 'I'm worthwhile' which is why I'm working hard on improving finances and feel like asking for help here is the next step.
Other points I'd like to mention - my parent stopped drinking many years ago, they are still together and their relationship is much better and more balanced. They both used to work full time, so they weren't always unemployed. I have talked to them both individually about the issues my childhood experiences left me with etc and am happy that I have made my peace with my parents. Our relationship is now massively improved - it's calmer and enjoyable. We even took a fab holiday together recently for the first time since I was a kid.
Throughout the madness of my life (violence, addiction, lots of arrests, my financee dying), I have created lots of amazing experiences for myself - travellng and living in other countries for example, festivals, dancing til dawn etc, so it's not all some deep dark tragic soap opera!!!
Also, I have worked really hard to overcome various things in my life and to choose to change my beliefs and mindset to ones that empower me rather than limit me. So, I know that my financial situ is pretty dire, but I'm constantly improving it (nothing bought on credit for years, wasteful spending decreased totally, utilities frequently renegotiated etc) and I feel that if I can get a solid structure in place now when I have very little surplus money to throw at debt, it will give me an excellent foundation for as and when I have additional income to do so.
Edit: Also, also I really want to be clear on this - me and my Mum and Dad have always been close despite the 'issues', but we always had a pretty volatile relationship. We now enjoy a really mutually supportive, loving, caring, enjoyable relationship and I completely love and respect them and understand their past choices - ultimately we all have a past and I think we all make choices that could have been better sometimes.
Specific Question(s):
My first goal is to continue to work on my health so that I can get back to earning money. My other goals are to improve my credit rating, so that I can refinance for better interest rates and pay off my mortage, so that I can sell and buy the next place for cash as I do not like where I live (understatement). I was going to split my surplus income between the 2 loans and the mortgage, but would it be better to throw it all at one of these items instead?
Acheivements this year re finance:
Can't remember when I first saw MMM (maybe within the last year), but it really opened my eyes up to the fact I was living in a flaming full on emergency, and it gave me the realisation that I could get control over my finances. I had been really struggling to see a way out of it previously and was totally overwhelmed. I then set myelf a goal to pay of my old credit card by the end of this year. I made extra payments and negotiated with the credit card company (so far they've written off £450 and I'm negotiating further with them at the mo - this was for charges they made on the account after I had advised them I was in financial difficulties).
I don't pay for gym memberships (never have) - use the great outdoors for exercise and yoga (for free) at home.
I am a girly girl, but I do my own manicures and pedicures (always have)
You know what - the list goes on, so I think it's time to post and be brave.
Really looking forward to hearing from you!